The relationship between customer satisfaction and shareholder value

Abstract This paper studies the relationship between customer satisfaction and shareholder value. In the first section of the paper the link between the two variables is examined theoretically, it is then tested empirically. Customer satisfaction data were taken from the American Customer Satisfaction Index (ACSI) database. Shareholder value was measured using Tobin's q. The sample consisted of 99 companies with ACSI data and Tobin's q from 1994 to 2002. The results of this study give insights into the relationship between customer satisfaction and shareholder value. First, there is a positive association between customer satisfaction and shareholder value. Second, this relationship is not affected by the turbulence of financial markets after the beginning of the year 2000. Third, there is a time lag of three quarters between customer satisfaction and the strongest impact on shareholder value. Fourth, it seems that there exists an optimal level of customer satisfaction, and if it is exceeded value will be destroyed.

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